Under the Income Tax Act, divisions have been made in respect of individuals, companies, firms and HUFs. All these different entity have their separate legal existence and the taxability structure also varies from each other. In this article, Tax Mantra has tried to provide a detailed view about HUFs and their partitions.

HUFs are the “Hindu Undivided Families” which have their separate legal entity for the purpose of assessment under the law. It is included under the definition of ‘person’ in sec 2(31) of the Income Tax Act. The levy of income is on every ‘person’. Therefore, Income Tax is payable by the HUFs. The HUFs have been defined under the Hindu law as a family, which consists of male lineally descended from a common ancestor and included their wives and unmarried daughters.

The relation of HUF does not arise from contracts but arise from the status. Until the partition tales place a male member continues to be the member of the family or HUF, but after partition he ceases to be a member of the family. However, he becomes a member of another smaller family. Also a female member continues to be a member when she is born but ceases to be a member after her marriage.

A HUF contains may contain many members but a members with four degrees including the head of the family (karta) are called co- parceners. Only coparceners have the right to partition. The income of an HUF is to be assessed in the hands of the HUF not in the hands of any of its members. Partition under HUFs has been categorized under two headings which are – Partial partition and Total Partition.

Types of partitions:

1.  Total Partition – It is the type of partition in which the entire family property is being divided amongst the coparceners. After the total; partition takes place, the HUF ceases to exist. All property is being divided among the coparceners of the Hindu Undivided Family.

2.  Partial Partition – It is the type of partition which is partial as regards either the person constituting the joint family or as regards the properties belonging to the joint family or both. In case of partial partition, some coparceners may separate from the joint family but other members continue to be a part of the joint family. In this case as regards the property, there may be a division or severance of interest in respect of some part of the estate of the joint family, while the rest of the estate may continue to remain as a part of the property of the joint family.

Effect of partial partition after 31^st Dec, 1978 – If any partial partitions have been affected after 31^st Dec, 1978 there will be no taxation aspects in it. If any partition occurs after 31^st Dec, 1978 then no claim of such partition shall be recorded by the Assessing Officer. Such families will be assessed as if no partition has been taken place. Every member of HUF, immediately before such partition, and the HUF shall be jointly and severally be liable for any sum payable under the Act. The several liability of a member would be proportionate to the share of joint family property allotted to him on such partial partition.

Assessment after Total Partition – When a claim of total partition of HUF has been made by any member of the HUF on behalf of the HUF, the assessing officer shall enquire upon it.  For this he shall serve a notice to all the members of HUFs and shall enquire whether total partition has taken place and if so on which date it is affected. If partition has been affected in the previous year, the total income of the HUF of the previous year up to the date of partition shall be the total income of the HUF. Every member of the HUF shall be jointly and severally liable for the tax on such assessed income of the HUF. The several liability of a member would be proportionate to the share of joint family property allotted to him on such partition.